----

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-QSB**

**CAMELOT      ENTERTAINMENT GROUP, INC. **

----

| ** Delaware**                                                                    | ** 52-2195605**                                        |
|---------------------------------------------------------------------------------------|-------------------------------------------------------------|
|  (State                  or other jurisdiction of incorporation or organization) |  (I.R.S.                  Employer Identification No.) |
|                                                                                  |                                                        |
|                                                                                  |                                                        |
|  **2020                  Main Street #990,  Irvine, CA**                    |  **92614**                                             |
|  (Address                  of principal executive offices)                       |  (zip                  code)                           |
|                                                                                  |                                                        |
|                                                                                  |                                                        |

|   |  **(949)                777-1090**                             |   |
|--------|---------------------------------------------------------------------|--------|
|   | (Registrant's                telephone number, including area code) |   |

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**CAMELOT      ENTERTAINMENT GROUP, INC.**

**INDEX      TO FORM 10-QSB**

|                                                                                                                                                           |                                    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
| **PART                  I. FINANCIAL INFORMATION**                                                                                                             |                                    |
|                                                                                                                                                           |                                    |
| Item                  1. Financial Statements (Unaudited)                                                                                                      | 4                                       |
|                                                                                                                                                           |                                    |
| Balance                  Sheets as of June 30, 2007 and December 31, 2006                                                                                      | 4                                       |
|                                                                                                                                                           |                                    |
| Statements                  of Operation for the three and six months ended June 30,                  2007 and 2006                             | 5                                       |
|                                                                                                                                                           |                                    |
| Statements                  of Changes in Stockholders’ Equity (Deficit) from inception                  through the six months ended June 30, 2007 | 6                  -                  7 |
|                                                                                                                                                           |                                    |
| Statements                  of Cash Flows for the six months ended, June 30, 2007 and                  2006                                                    | 8                  -                  9 |
|                                                                                                                                                           |                                    |
| Notes                  to Financial Statements                                                                                                                 | 10 -                  12           |
|                                                                                                                                                           |                                    |
| Item                  2. Management’s Discussion and Analysis of Financial Condition and Results                  of Operations                          | 13                                      |
|                                                                                                                                                           |                                    |
| Item                  3. Quantitative and Qualitative Disclosures About Market                  Risk                                                           | 18                                      |
|                                                                                                                                                           |                                    |
| Item                  4. Controls and Procedures                                                                                                               |  18                                |
|                                                                                                                                                           |                                    |
| **PART                  II. OTHER INFORMATION**                                                                                                                | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  1. Legal Proceedings                                                                                                                | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  2. Changes in Securities and Use of Proceeds                                                                                             | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  3. Defaults Upon Senior Securities                                                                                                       | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  4. Submissions of Matters to a Vote of Security                  Holders                                                                 | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  5. Other Information                                                                                                                | 19                                      |
|                                                                                                                                                           |                                    |
| Item                  6. Exhibits and Reports on Form 8-K                                                                                                 | 19                                      |
|                                                                                                                                                           |                                    |
| Signatures:                                                                                                                                               | 20                                      |
|                                                                                                                                                           |                                    |

----

----

| **Camelot                  Entertainment Group, Inc.**                                                                                                                                                                             |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Balance                  SheetsUnaudited                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |
| **ASSETS**                                                                                                                                                                                                                         |   |
|                                                                                                                                                                                                                               |   | **June                  30, ** |   |   | **December                  31,** |   |
|                                                                                                                                                                                                                               |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |
| Current                  Assets                                                                                                                                                                                                    |   |
| Cash                                                                                                                                                                                                                               |   | $ | 23,478 |   |   | $ | 435,533 |   |
| Prepaid                  Expenses                                                                                                                                                                                                  |   |   | 6,424 |   |   |   | 6,424 |   |
| Total                  Current Assets                                                                                                                                                                                              |   |   | 29,902 |   |   |   | 441,957 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Deferred                  Financing Costs                                                                                                                                                                                          |   |   | 69,732 |   |   |   | 74,744 |   |
| Loan                  Receivable                                                                                                                                                                                                   |   |   | 17,500 |   |   |   | 17,500 |   |
| Scripts                  Costs                                                                                                                                                                                                     |   |   | 79,700 |   |   |   | 75,800 |   |
| Deposit                  for potential business acquistion and studio project                                                                                                                                                      |   |   | 85,000 |   |   |   | 10,000 |   |
| Total                  long term assets                                                                                                                                                                                            |   |   | 251,174 |   |   |   | 178,044 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  Assets                                                                                                                                                                                                      |   | $ | 281,834 |   |   |   | 620,001 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY(DEFICT)**                                                                                                                                                                  |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Current                  Liabilities                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Accounts                  Payable and accured liabilities                                                                                                                                                                          |   | $ | 624,048 |   |   | $ | 140,625 |   |
| Note                  Payable - Scorpion Bay, LLC (net of unamortized discount of                  $34,948)                                                                                                                        |   |   | 65,052 |   |   |   | 250,000 |   |
| Stockholder                  advances                                                                                                                                                                                              |   |   | 30,720 |   |   |   | 186,000 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  Current Liabilities                                                                                                                                                                                         |   |   | 719,820 |   |   |   | 576,625 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Long                  Term Liabilities                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Secured                  Note Payable - NIR Fairhill, net of unamortized discount of                  $781,463                                                                                                                     |   |   | 189,954 |   |   |   | 1,521 |   |
| Derivative                  Liability - Compound                                                                                                                                                                                   |   |   | 976,533 |   |   |   | 538,890 |   |
| Derivative                  Liability - Warrant                                                                                                                                                                                    |   |   | 150,744 |   |   |   | 698,390 |   |
| Total                  Long Term Liabilities                                                                                                                                                                                       |   |   | 1,317,231 |   |   |   | 1,238,801 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  Liabilities                                                                                                                                                                                                 |   |   | 2,037,051 |   |   |   | 1,815,426 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Stockholders'                  Equity (Deficit)                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Common                  Stock; Par Value $.001 Per Share; Authorized  300,000,000                  Shares;122,058,450                  and 106,655,743 shares issued and outstanding,                  respectively |   |   | 122,058 |   |   |   | 106,656 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Class                  A Convertible Preferred Stock; Par Value $.01 per share                  15,000,000Authorized,5,100,000                  issued and outstanding shares                                                      |   |   | 5,100 |   |   |   | 5,100 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Class                  B Convertible Preferred Stock; Par Value $.01 per share 15,000,000                  Authorized,5,100,000                  issued and outstanding shares                                                     |   |   | 5,100 |   |   |   | 5,100 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Subscription                  Receivable                                                                                                                                                                                           |   |   | (758,072 | ) |   |   | (258,072 | ) |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Capital                  in Excess of Par Value                                                                                                                                                                                    |   |   | 14,044,274 |   |   |   | 13,119,002 |   |
| Deficit                  Accumulated During the Development Stage                                                                                                                                                                  |   |   | (15,173,677 | ) |   |   | (14,173,211 | ) |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  Stockholders' Equity (Deficit)                                                                                                                                                                              |   |   | (1,755,217 | ) |   |   | (1,195,425 | ) |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Total                  Liabilities and Stockholders' Equity (Deficit)                                                                                                                                                              |   | $ | 281,834 |   |   | $ | 620,001 |   |
|                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integal part of theses financial                  statements.                                                                                                                       |   |

----

| **Camelot                    Entertainment Group,                    Inc.**                       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| Statements                    of                    Operations                |
| Unaudited                                                                     |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | **From** |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | **Inception                    on** |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | **April                    21, 1999** |   |
|                                                                                                                                                     |   | **For                    Three Months ended,** |   |   | **For                    the Six months ended** |   |   | **through** |   |
|                                                                                                                                                     |   | **June                    30,** |   |   | **June                    30,** |   |   | **June                    30,** |   |   | **June                    30,** |   |   | **June                    30,** |   |
|                                                                                                                                                     |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUE                                                                                                                                                  |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 58,568 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total                    Revenue                                                                                           |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 58,568 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs                    of services                                                                                                                     |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | 95,700 |   |
| Sales                    and Marketing                                                                                                                   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | 53,959 |   |
| Research                    & Development                                                                                                            |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | 252,550 |   |
|   General                    & Administrative                                                                                              |   |   | 552,359 |   |   |   | 202,956 |   |   |   | 938,780 |   |   |   | 393,716 |   |   |   | 11,086,253 |   |
| Impairment                    of assets                                                                                                                  |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | 2,402,338 |   |
| Impairment                    of investments in                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| other                    companies                                                                                                                       |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | 710,868 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total                    Expenses                                                                                                |   |   | 552,359 |   |   |   | 202,956 |   |   |   | 938,780 |   |   |   | 393,716 |   |   |   | 14,601,668 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                    OPERATING LOSS                                                                                                                    |   |   | (552,359 | ) |   |   | (202,956 | ) |   |   | (938,780 | ) |   |   | (393,716 | ) |   |   | (14,543,100 | ) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                    INCOME (EXPENSES)                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Interest                    (Expense)                                                                                      |   |   | (410,806 | ) |   |   | - |   |   |   | (463,956 | ) |   |   | - |   |   |   | (651,066 | ) |
|      Gain                    on derivative liability                                                                            |   |   | 821,318 |   |   |   | - |   |   |   | 838,915 |   |   |   | - |   |   |   | 868,395 |   |
|      Loss                    on derivative liability                                                                            |   |   | (203,794 | ) |   |   |   |   |   |   | (436,645 | ) |   |   |   |   |   |   | (1,103,406 | ) |
|      Gain                    on extinguishment of debt                                                                          |   |   | -  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 255,500 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total                    Other Income (Expenses)                                                                                 |   |   | 206,719 |   |   |   | - |   |   |   | (61,686 | ) |   |   | - |   |   |   | (630,577 | ) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                    LOSS                                                                                                                              |   |   | (345,641 | ) |   |   | (202,956 | ) |   |   | (1,000,466 | ) |   |   | (393,716 | ) |   | $ | (15,173,677 | ) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                    LOSS PER COMMON SHARE                                                                                                           |   |   | (0.0030 | ) |   |   | (0.0022 | ) |   |   | (0.0090 | ) |   |   | (0.0042 | ) |   | $ | (0.29 | ) |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED                    AVERAGE NUMBER OF                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHARES                    OUTSTANDING                                                                                                                    |   |   | 114,097,641 |   |   |   | 93,649,589 |   |   |   | 110,793,359 |   |   |   | 93,649,589 |   |   |   | 52,395,377 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  The                    accompanying notes are an integral part of these financial                    statements.                                   |

----

| **Camelot                Entertainment Group, Inc.**                  |
|----------------------------------------------------------------------------|
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **STATEMENTS                OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)** |
|                                                                       |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **(Deficit)** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Accumulated** |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   | **Common                Stock** | ** ** | ** ** | **Preferred                Stock** | ** ** | ** ** | **Additional** | ** ** | ** ** | **During** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Paid-In** | ** ** | ** ** | **Development** | ** ** | ** ** | **Subscription** | ** ** | ** ** | **Deferred** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                 | ** ** | ** ** | **Shares** | ** ** | ** ** | **Amount** | ** ** | ** ** | **Shares** | ** ** | ** ** | **Amount** | ** ** | ** ** | **Capital** | ** ** | ** ** | **Stage** | ** ** | ** ** | **Receivable** | ** ** | ** ** | **Compensation** | ** ** | ** ** | **Total** |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at January 1, 2004                             |   |   | 33,856,433 |   |   |   | 33,857 |   |   |   | 0 |   |   |   | 0 |   |   |   | 5,464,539 |   |   |   | (6,059,442 | )  |   |   | 0 |   |   |   | 0 |   |   |   | (561,046 | )  |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for services                             |   |   | 100,000 |   |   |   | 100 |   |   |   |   |   |   |   |   |   |   |   | 2,900 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 3,000 |   |
| Shares                issued for financing                            |   |   | 6,791,287 |   |   |   | 6,791 |   |   |   |   |   |   |   |   |   |   |   | 196,948 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 203,739 |   |
| Subscriptions                receivable for financing agreement       |   |   | 0 |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (116,069 | )  |   |   |   |   |   |   | (116,069 | )  |
| Net                (loss) for the three months ended March 31, 2004   |   |   | 0 |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (103,522 | )  |   |   |   |   |   |   |   |   |   |   | (103,522 | )  |
| Balance                at March 31, 2004                              |   |   | 40,747,720 |   |   | $ | 40,748 |   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 5,664,387 |   |   |   | (6,162,964 | ) |   | $ | (116,069 | ) |   | $ | 0 |   |   | $ | (573,898 | ) |
| Share                issued for services                              |   |   | 24,009,000 |   |   |   | 24,009 |   |   |   |   |   |   |   |   |   |   |   | 1,085,500 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,109,509 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share                issued for financing                             |   |   | 7,604,562 |   |   |   | 7,605 |   |   |   | 0 |   |   |   | 0 |   |   |   | 221,460 |   |   |   |   |   |   |   | (316,003 | ) |   |   |   |   |   |   | (86,938 | ) |
| Advances                offset sub a/r                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 174,000 |   |   |   |   |   |   |   | 174,000 |   |
| Shares                issued for debt                                 |   |   | 1,000,000 |   |   |   | 1,000 |   |   |   | 0 |   |   |   | 0 |   |   |   | 39,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 40,000 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for amt due                              |   |   | 1,589,927 |   |   |   | 1,590 |   |   |   | 0 |   |   |   | 0 |   |   |   | 47,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 48,590 |   |
| Value                of option exercised                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 351,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 351,000 |   |
| Net                (loss)                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,161,756 | ) |   |   |   |   |   |   |   |   |   |   | (1,161,756 | ) |
| **Balance                as of December 31, 2004**                    |   |   | 74,951,209 |   |   |   | 74952 |   |   |   | 0 |   |   |   | 0 |   |   |   | 7,408,347 |   |   |   | (7,324,720 | ) |   |   | (258,072  | ) |   |   |   |   |   |   | (99,493 | ) |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                (loss) 1st quarter                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (117,096 | ) |   |   |   |   |   |   |   |   |   |   | (117,096 | ) |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                at March 31, 2005**                          |   | ** ** | **74,951,209** |   |   | ** ** | **74,952** |   |   | **$** | **0** |   |   | **$** | **0** |   |   | ** ** | **7,408,347** |   |   | ** ** | **(7,441,816** | **)** |   | ** ** | **(258,072** | **)** |   | **$** | **0** |   |   | ** ** | **(216,589** | **)** |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for                                      |   |   | 4,000,000 |   |   |   | 4,000 |   |   |   | 0 |   |   |   | 0 |   |   |   | 216,000 |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   | 220,000 |   |
| consulting                services                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for                                      |   |   | 2,276,033 |   |   |   | 2,276 |   |   |   | 0 |   |   |   | 0 |   |   |   | 187,568 |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   | 189,844 |   |
| officers                salaries                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                     issued to                                  |   |   | 1,848,723 |   |   |   | 1,848 |   |   |   | 0 |   |   |   | 0 |   |   |   | 79,078 |   |   |   | 0 |   |   |   |   |   |   |   |   |   |   |   | 80,926 |   |
| Eagle                for expenses paid                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Loss                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (486,174 | ) |   |   |   |   |   |   |   |   |   |   | (486,174 | ) |
| Subtotals                for 2nd quarter                              |   |   | 8,124,756 |   |   |   | 8,125 |   |   |   | 0 |   |   |   | 0 |   |   |   | 482,646 |   |   |   | (486,174 | ) |   |   |   |   |   |   |   |   |   |   | 4,597 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                at June 30, 2005**                           |   | ** ** | **83,075,965** |   |   | ** ** | **83,076** |   |   | ** ** | **0** |   |   | ** ** | **0** |   |   | ** ** | **7,890,993** |   |   | ** ** | **(7,927,990** | **)** |   | ** ** | **(258,072** | **)** |   |   |   |   |   | ** ** | **(211,993** | **)** |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Loss                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (127,024 | ) |   |   |   |   |   |   |   |   |   | $ | (127,024 | ) |
| **Balance                at Sept 30, 2005**                           |   |   | 83,075,965 |   |   |   | 83,076 |   |   |   | 0 |   |   |   | 0 |   |   |   | 7,890,993 |   |   | $ | (8,055,014 | ) |   | $ | (258,072 | ) |   |   |   |   |   |   | (339,017 | ) |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for                                      |   |   | 233,547 |   |   |   | 233 |   |   |   | 0 |   |   |   | 0 |   |   |   | 9,767 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10,000 |   |
| consulting                services                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for                                      |   |   | 3,538,263 |   |   |   | 3,538 |   |   |   | 0 |   |   |   | 0 |   |   |   | 171,462 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 175,000 |   |
| officers                salaries                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued to                                       |   |   | 1,452,662 |   |   |   | 1,453 |   |   |   | 0 |   |   |   | 0 |   |   |   | 118,219 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 119,672 |   |
| Eagle                for expenses paid                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued to Eagle                                 |   |   | 1,762,271 |   |   |   | 1,762 |   |   |   |   |   |   |   |   |   |   |   | 120,991 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 122,753 |   |
| 20%                of shares issued                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                issued for                                      |   |   | 3,586,881 |   |   |   | 3,587 |   |   |   |   |   |   |   |   |   |   |   | 256,354 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 259,941 |   |
| Shareholder                loans 2005                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Loss 4th Quarter                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (3,769,845 | ) |   |   |   |   |   |   |   |   |   |   | (3,769,845 | ) |
| Class                A Preferred Stock issued                         |   |   |   |   |   |   |   |   |   |   | 5,100,000 |   |   |   | 5,100 |   |   |   | 555,900 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 561,000 |   |
| Class                B Preferred Stock issued                         |   |   |   |   |   |   |   |   |   |   | 5,100,000 |   |   |   | 5,100 |   |   |   | 2,799,900 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,805,000 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                at Dec 31, 2005**                            |   | ** ** | **93,649,589** |   |   | ** ** | **93,649** |   |   | ** ** | **10,200,000** |   |   | ** ** | **10,200** |   |   | ** ** | **11,923,586** |   |   | ** ** | **(11,824,859** | **)** |   | ** ** | **(258,072** | )  |   |   |   |   |   |   | **(55,496** | **)** |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**STATEMENTS        OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)        -**
*continued*

| Shares                issued for             |   |       | 5,191,538       |      |   |       | 5,192       |   |   |       | 0              |   |   |       | 0          |   |   |       | 464,808        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 470,000        |       |
|---------------------------------------------------|--------|------------|-----------------|-----------|--------|------------|-------------|--------|--------|------------|----------------|--------|--------|------------|------------|--------|--------|------------|----------------|--------------|--------|------------|-----------------|------------|---------|------------|--------------|---------|--------|--------|--------|--------|--------|--------|----------------|------------|
| officers                salaries             |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
| Shares                issued to Consultants  |   |       | 2,009,787       |      |   |       | 2,010       |   |   |       |           |   |   |       |       |   |   |       | 179,078        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 181,088        |       |
| Shares                issued to Eagle        |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
| for                expenses paid             |   |       | 1,201,329       |      |   |       | 1,201       |   |   |       | 0              |   |   |       | 0          |   |   |       | 113,120        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 114,321        |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued to Eagle        |   |       | 1,270,772       |      |   |       | 1,271       |   |   |       | 0              |   |   |       | 0          |   |   |       | 116,911        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 118,182        |       |
| Shareholder                loans             |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued to Eagle        |   |       | 1,832,728       |      |   |       | 1,833       |   |   |       | 0              |   |   |       | 0          |   |   |       | 168,611        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 170,444        |       |
| per                agreement 20%             |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued to              |   |       | 1,500,000       |      |   |       | 1,500       |   |   |       | 0              |   |   |       | 0          |   |   |       | 133,650        |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 135,150        |       |
| Scorpion                Bay LLC              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
| Imputed              interest on                  |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
| shareholders              loan                    |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           | 19,238  |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           | 19,238     |   |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
|  Net              Loss                       |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            | (2,348,352 | )  |       |         |    |   |   |   |   |   |   |           | (2,348,352 | )  |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| **Balance                at Dec 31, 2006**   |   | ** ** | **106,655,743** |      |   | ** ** | **106,656** |   |   | ** ** | **10,200,000** |   |   | ** ** | **10,200** |   |   | ** ** | **13,119,002** |         |   | ** ** | **(14,173,211** | **)**      |    | ** ** | **(258,072** | )  |   |   |   |   |   |   | **(1,195,425** | **)**      |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued to Nucore       |   |       | 5,000,000       |      |   |       | 5,000       |   |   |       |           |   |   |       |       |   |   |       | 495,000        |         |   |       |            |       |    |       | (500,000     | )       |   |   |   |   |   |   | -              |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued for             |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
| interest                on note payable           |   |       | 7,000,000  |      |   |       | 7,000  |   |   |       |           |   |   |       |       |   |   |       | 332,000   |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 339,000   |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued for expenses paid    |   |       | 401,957         |      |   |       | 401         |   |   |       | -              |   |   |       | -          |   |   |       | 15,676         |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   | 16,077         |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |
| Shares                issued for services         |   |       |            | 1,250,000 |   |       |        | 1,250  |   |       |           | -      |   |       |       | -      |   |       |           | 48,750       |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           | 50,000     |   |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |
|                                              |   |       |            |      |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |         |   |       |            |       |    |       |         |    |   |   |   |   |   |   |           |       |   |

| Shares                issued  for conversions of notes payable:                                                                                                        |   | 1,750,750  |            |   |   | 1,751      |        |   |   |       |           |   |   |       |       |   |   | 27,012     |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   | 28,763     |           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|-----------------|--------|--------|------------|-------------|--------|--------|------------|----------------|--------|--------|------------|------------|--------|--------|------------|----------------|---------|--------|------------|-----------------|--------|--------|------------|--------------|--------|--------|------------|--------|--------|--------|------------|----------------|
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
| Accelerated              amortization of discount on notes payable                                                                                                     |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       | (23,460        | )  |   |       |            |   |   |       |         |   |   |       |   |   |   |       | (23,460        | )  |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |
| Derivative                liability relieved by                                                                                                                                  |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |
| conversions              of notes payable                                                                                                                                        |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       | 28,048         |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       | 28,048         |   |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
| Imputed                interest on shareholder loan                                                                                                                              |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       | 2,246          |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       | 2,246          |   |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |
| Net                Loss                                                                                                                                                          |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   | ** ** | (1,000,466      | )      |   |       |         |   |   |       |   |   |   |       | (1,000,466     | ) |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
| **Balance                at June 30, 2007**                                                                                                                                 |   | ** ** | **122,058,450** |   |   | ** ** | **122,058** |   |   | ** ** | **10,200,000** |   |   | ** ** | **10,200** |   |   | ** ** | **14,044,274** |    |   | ** ** | **(15,173,677** | **)**  |   | ** ** | **(758,072** | **)**  |   | ** ** | **-**  |   |   | ** ** | **(1,755,217** | **)** |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
|                                                                                                                                                                             |   |       |            |   |   |       |        |   |   |       |           |   |   |       |       |   |   |       |           |    |   |       |            |   |   |       |         |   |   |       |   |   |   |       |           |   |   |
|  The                accompanying notes are an integral part of these financial                statements.            |

----

| **Camelot                  Entertainment Group, Inc.**                                                            |
|------------------------------------------------------------------------------------------------------------------------|
| Statement                  of Cash Flows                                                                               |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |
|                                                                                                                   |   |   |   |   |   |   |   | **From** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Inception                  on** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **April                  21, 1999** |   |
|                                                                                                                   |   | **For                  six months ended** |   |   | **For                  six months ended** |   |   | **through** |   |
|                                                                                                                   |   | **June                  30,** |   |   | **June                  30,** |   |   | **June                  30,** |   |
|                                                                                                                   |   | **2007** |   |   | **2006** |   |   | **2007** |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |
| OPERATING                  ACTIVITIES                                                                                  |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                              |   | $ | (1,000,466 | ) |   | $ | (393,716 | ) |   | $ | (15,173,677 | ) |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments                  to reconcile net (loss) to cash provided (used) by operating                  activities: |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                  of deferred financing cost                                                               |   |   | 18,012 |   |   |   | -  |   |   |   | 18,268 |   |
| Amortization                  of discount associated with notes payable                                                |   |   | 117,922 |   |   |   | -  |   |   |   | 119,443 |   |
| Imputed                  interest on shareholder loan                                                                  |   |   | 2,246 |   |   |   | -  |   |   |   | 21,484 |   |
| Loss                  on derivative liability                                                                          |   |   | 436,645 |   |   |   | -  |   |   |   | 1,103,406 |   |
| Gain                  on derivative liability                                                                          |   |   | (838,915 | ) |   |   | - |   |   |   | (868,395 | ) |
| Common                  Stock issued for interest expenses                                                             |   |   | 300,000 |   |   |   | - |   |   |   | 435,150 |   |
| Common                  stock issued per dilution agreement                                                            |   |   | - |   |   |   | - |   |   |   | 368,508 |   |
| Value                  of options expensed                                                                             |   |   | - |   |   |   | - |   |   |   | 351,000 |   |
| Gain                  on extinguishment of debt                                                                        |   |   | - |   |   |   | - |   |   |   | (255,500 | ) |
| Depreciation                                                                                                           |   |   | -  |   |   |   | -  |   |   |   | 3,997 |   |
| Amortization                  of deferred compensation                                                                 |   |   | - |   |   |   | - |   |   |   | 1,538,927 |   |
| Common                  Stock issued for services                                                                      |   |   | 50,000 |   |   |   | - |   |   |   | 2,583,935 |   |
| Common                  Stock issued for expense reimbursement                                                         |   |   | - |   |   |   | -  |   |   |   | 22,000 |   |
| Common                  Stock issued for technology                                                                    |   |   | -  |   |   |   | -  |   |   |   | 19,167 |   |
| Impairment                  of investments in other companies                                                          |   |   | - |   |   |   | -  |   |   |   | 710,868 |   |
| Impairment                  of assets                                                                                  |   |   | -  |   |   |   | -  |   |   |   | 2,628,360 |   |
| Prepaid                  services expensed                                                                             |   |   | - |   |   |   | 2,392 |   |   |   | 530,000 |   |
| Expenses                  paid through notes payable proceeds                                                          |   |   | - |   |   |   | - |   |   |   | 66,489 |   |
| Loss                  on disposal of property and equipment                                                            |   |   | -  |   |   |   | -  |   |   |   | 5,854 |   |
| Preferred                  Stock issued to shareholder                                                                 |   |   | - |   |   |   | - |   |   |   | 3,366,000 |   |
| Change                  in assets and liabilities:                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| (increase)                  decrease in other current assets                                                           |   |   | - |   |   |   | (20,626 | ) |   |   | (24,358 | ) |
| Increase                  (decrease) in accounts payable & other a/p                                               |   |   | 483,603 |   |   |   | 182,891 |   |   |   | 831,369 |   |
| Increase                  (decrease) in due to officers                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Cash used in operating activities**                                                             |   |   | **(430,953** | **)** |   |   | **(229,059** | **)** |   |   | **(1,597,705** | **)** |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase                  of fixed assets                                                                              |   |   | -  |   |   |   | -  |   |   |   | (6,689 | ) |
| Purchase                  of assets-Script Costs/business deposits                                                     |   |   | (78,900 | ) |   |   | (60,000 | ) |   |   | (164,700 | ) |
| **Net                  Cash used ininvesting activities**                                                              |   |   | **(78,900** | **)** |   |   | **(60,000** | **)** |   |   | **(171,389** | **)** |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Contributed                  capital                                                                                   |   |   | -  |   |   |   | -  |   |   |   | 25,500 |   |
| Borrowings                  on related party debt                                                                      |   |   | 132,686 |   |   |   | 294,292 |   |   |   | 1,149,299 |   |
| Payments                  on related party debt                                                                        |   |   | (271,888 | ) |   |   | - |   |   |   | (396,888 | ) |
| Borrowings                  on debt                                                                                    |   |   | 500,000 |   |   |   | -  |   |   |   | 1,355,998 |   |
| Deferred                  financing costs                                                                              |   |   | (13,000  | ) |   |   | -  |   |   |   | (88,000 | ) |
| Principal                  payments on long term debt                                                                  |   |   | (250,000 | ) |   |   | (4,477 | ) |   |   | (254,477 | ) |
| **Cash                  provided by financing activities**                                                             |   |   | **97,798** |   |   |   | **229,815** |   |   |   | **1,791,432** |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Statement          of Cash Flows-**
*continued*

|                                                                                                                                                                                       |   |   |         |   |   |   |    |   |   |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|---------|--------|--------|--------|--------------|--------|
| Increase                  (decrease) in cash                                                                                                                                               |   |   | (412,055     | )      |   |   | 756     |   |   |   | 22,338       |   |
|                                                                                                                                                                                       |   |   |         |   |   |   |    |   |   |   |         |   |
| Cash                  at beginning of period                                                                                                                                               |   |   | 435,533      |   |   |   | 3,023   |   |   |   | 1,140        |   |
|                                                                                                                                                                                       |   |   |         |   |   |   |    |   |   |   |         |   |
| Cash                  at the end of the period                                                                                                                                             |   |   | 23,478       |   |   |   | 3,779   |   |   |   | 23,478       |   |
|                                                                                                                                                                                       |   |   |         |   |   |   |    |   |   |   |         |   |
| **Supplemental                  Schedule of Non-cash Information:**                                                                                                                        |   |   |         |   |   |   |    |   |   |   |         |   |
| Noncash                  investing and financing activities:                                                                                                                               |   |   |         |   |   |   |    |   |   |   |         |   |
| Creation                  of debt discount                                                                                                                                                 |   |   | 359,315      |   |   |   | -       |   |   |   | 959,315      |   |
| Stock                  issued for related party debt                                                                                                                                       |   |   | 16,078       |   |   |   | -       |   |   |   | 248,581      |   |
| Stock                  issued in advance of financing arrangement                                                                                                                          |   |   | 500,000      |   |   |   | -       |   |   |   | 500,000      |   |
|  Stock                  issued for conversion of debt to equity                                                                                                                       |   |   | 28,763  |   |   |   |  - |   |   |   | 28,763  |   |
|  Accelerated                  amortization of discount on notes payable                                                                                                               |   |   | 23,460  |   |   |   |  - |   |   |   | 23,460  |   |
|  Derivative                  liability relieved by conversions of notes payable                                                                                                       |   |   | 28,048  |   |   |   |  - |   |   |   | 28,048  |   |
|                                                                                                                                                                                       |
|  The                  accompanying notes are an integral part of these financial                  statements.             |

----

**CAMELOT        ENTERTAINMENT GROUP, INC.**

**NOTES        TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30, 2007**

----

**1.      BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**

----

**CAMELOT        ENTERTAINMENT GROUP, INC.**

**NOTES        TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED, JUNE 30, 2007**

----

**2.         GOING CONCERN**

**3.       COMMITMENTS AND CONTINGENCIES**

**4.       NOTES PAYABLE**

----

**CAMELOT        ENTERTAINMENT GROUP, INC.**

**NOTES        TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED, JUNE 30, 2007**

----

**4.       NOTES PAYABLE -**
*continued*

**5.  DUE      TO OFFICERS**

**6.       RELATED PARTY TRANSACTIONS**

**7.       COMMON STOCK**

**8.       SUBSEQUENT EVENTS**

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**Critical      Accounting Estimates**

**Critical      Accounting Policies**

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**
*continued*

*Accounting      for Motion Picture Costs*

*Accounting      for Films*

*Derivative        Instruments*

*“Accounting for Derivative Instruments and        Hedging Activities,” *
*“Accounting for Derivative Instruments and Hedging        Activities - Deferral of the Effective Date of Financial Accounting Standards        Board No. 133,” *
*“Accounting for Certain Derivative Instruments and Certain Hedging        Activities - an Amendment of Financial Accounting Standards Board Statement        No.        133,” *

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**
*continued*

*Going      Concern Uncertainties*

**Plan      of Operations**

**Overview**

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**
*continued*

**Recent      Financing**

|   | 1. | At                closing on December 27, 2006 (“Closing”), the Investors purchased Notes                aggregating $600,000 and Warrants to purchase 10,000,000 shares of                CMEG                common stock; |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Upon                effectiveness of the Registration Statement, June 6, 2007, the Investors                purchased Notes aggregating                $400,000. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**RESULTS      OF OPERATIONS**

*General*

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**
*continued*

**PERIOD      ENDED JUNE 30, 2007, COMPARED TO PERIOD ENDED JUNE 30,      2006: **

**LIQUIDITY      AND CAPITAL RESOURCES**

----

**ITEM      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**
*continued*

*We      expect to have a need for Additional Financing*

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**FACTORS      THAT MAY AFFECT FUTURE RESULTS**

*We      have an Accumulated Deficit and we have no History of Operations as a Motion      Picture Company*

**ITEM      4. CONTROLS AND PROCEDURES**

----

**PART      II. OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**ITEM      2. CHANGE IN SECURITIES**

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES      HOLDERS**

**ITEM      5. OTHER INFORMATION**

**ITEM      6. EXHIBITS AND REPORTS ON FORM 8-K**

| 31.1 | Certificate                of the Chief Executive Officer pursuant to Rule 13a-14(a) of the                Exchange                Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002 |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certificate                of the Chief Financial Officer pursuant to Rule 13a-14(a) of the                Exchange                Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002 |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                         |                                                  |                                             |
|---------------------------------------------------|-------------------------------------------------------|--------------------------------------------------|
|                                              | CAMELOT                  ENTERTAINMENT GROUP, INC.    |
|                                              |  (Registrant)                                    |
|                                         |                                             |                                        |
| Date: August                  17, 2007  | By:                                         | /s/ ROBERT                  P. ATWELL  |
|                                              | Title:                  Chief Executive Officer  |

|                                              |                                            |                                           |
|---------------------------------------------------|-------------------------------------------------|------------------------------------------------|
|                                         |                                       |                                      |
| Date: August                  17, 2007  | By:                                   | /s/ GEORGE                  JACKSON  |
|                                              | Title:                  Chief Financial Officer |

----